|
US-Venezuela Oil Deal Causes Controversy
Outlook marred by drilling, legal and political challenges -- and intermediary’s reputation.
BY LATINVEX STAFF
Nearly eight months after ousting Venezuelan president Nicolas Maduro, President Donald Trump announced a major deal that would give the United States control of 17 oil fields with a proven potential of 65 billion barrels.
“The United States of America has just entered into an Agreement with the Country of Venezuela on, THE BIGGEST OIL DEAL IN WORLD HISTORY!” Trump wrote on Truth Social. “This Historic Transaction MORE THAN DOUBLES American Oil Reserves.”
The government of Interim Venezuelan President Delcy Rodríguez said the agreement was “historic” and would generate $100 billion in investment and more than $209 billion in tax revenue.
The vehicle is a joint venture with US-based North American Blue Energy Partners (NABEP) led by Venezuelan businessman Alejandro Betancourt, who is being probed in Spain and Switzerland for suspected financial crimes and made a fortune during the dictatorship of the late Hugo Chavez with what Transparency Venezuela says was an over-bloated contract in the electricity sector.
The US government plans to take a 35% passive stake in NABEP and secure preferential rights to purchase 20% of the company’s production at cost.
Industry and legal experts have raised doubts about the deal’s value and long-term sustainability.
NO SHORT-TERM RESULTS
“Meaningful new barrels are years away,” says Dan Alamariu, Chief Geopolitical Strategist at Alpine Macro, an Oxford Economics company. “Much of Venezuelan oil is extra-heavy crude sitting behind decayed infrastructure, so significant output growth will require substantial investment and time.”
Trump’s pledge to use this oil to refill the US Strategic Petroleum Reserve (SPR) also faces practical constraints, given the time required and the difficulty of storing Venezuelan extra-heavy crude directly in the current U.S. reserve infrastructure, he adds.
Meanwhile, analysts at leading energy research company Wood Mackenzie estimate a break-even cost of $80 a barrel for new projects in the Orinoco, Venezuela — far above the threshold required for serious investment, the Daily Telegraph reports. By comparison, BloombergNEF estimates Guyana projects can break even near $35 a barrel, and the Exxon-favored Permian Midland Basin has an average break-even oil price of $48 a barrel.
“We see limited appetite among US energy majors to deploy capital in Venezuela at the scale or pace targeted by the US administration, driven by heightened political risk and broader uncertainty,” Bloomberg Professional Services says.
While Chevron is upping its bet on Venezuela, other top US oil producers like ExxonMobil and ConocoPhillips will likely wait for now.
“Both ExxonMobil and ConocoPhillips maintain highly cautious, return-driven strategies focused on legacy resolution over new outlays,” Bloomberg Professional Services says.
ConocoPhillips is prioritizing the recovery of its $10-$12 billion international arbitration award following the 2007 expropriation of its Orinoco Belt and offshore Corocoro assets, while ExxonMobil views the jurisdiction as “uninvestable” absent durable legal guarantees and a commercial overhaul, with the country still owing the operator about $1-$2 billion, it adds.
“Thus, unresolved legacy claims and deep investor anxiety will continue to cap near-term capital commitments from US operators,” Bloomberg Professional Services says.
Venezuela must fundamentally restructure its fiscal regime to successfully compete for global upstream capital, it points out. The current legal and regulatory framework and legacy production sharing agreements disproportionately favor the state, imposing onerous fiscal burdens including royalties up to 30% and taxes of roughly 15%.
POLITICAL OUTLOOK
The politics of the deal also raise questions about its sustainability, experts say.
“A change of government in Caracas or a post-Trump administration could unwind it,” Alamariu says. “It resembles a colonial-era resource concession and is likely to raise hackles in both Washington and Caracas.”
And, if Democrats win one or both chambers in the November U.S. midterms, heavy scrutiny could begin in 2027, he adds.
“Long-term uncertainty will … increase as it’s unclear whether a future US president would embrace a deal,” Bloomberg Professional Services says in an analysis.
BETANCOURT
Meanwhile, the key role of Betancourt is putting off major oil companies.
Betancourt was detained by British police in London twice last year and a few days later, Spanish authorities raided his palatial estate in the province of Toledo. Both swoops were reportedly linked to an investigation into alleged money laundering initiated by the Swiss public prosecutor’s office, according to the BBC. US authorities urged Switzerland to drop its extradition request against the businessman before the British courts, The Washington Post reports.
In Spain, Betancourt and his associates are accused of bribing three officials of the Venezuelan state oil company PDVSA with $42 million to defraud $4.85 billion in foreign exchange transactions channeled through oil, El Pais reports. This money, according to the Spanish justice system, ended up in companies, investments, and high-value properties in Spain.
In 2009, Derwick Associates, an engineering firm that Betancourt founded with a cousin, received 12 government contracts, awarded without bidding, for a total of $5 billion, despite no prior experience in the sector. According to Transparency Venezuela, the overpricing of the contracts was around $2.9 billion, and several of those plants never functioned as promised. In 2013, the former US ambassador to Venezuela, Otto Reich, filed a lawsuit in an American court against Betancourt and two of his associates for “paying large sums to [Venezuelan] public officials in exchange for awarding them contracts.”
“Oil majors and large foreign companies negotiating contract migrations want to make sure they will not be seated at the same table with Betancourt,” Reuters quotes a person involved in preparations for the key September 2, 2026 oil contract signing event in Caracas.
According to El Pais, the Trump Administration pressured Venezuela’s acting president Delcy Rodriguez to use Betancourt as an intermediary between Venezuela and the US on oil issues.
“It is unclear how keen oil majors will be to do significant business with NABEP,” Alamariu says. “The deal’s central partner may be viewed as a compliance and counterparty risk.”
VENEZUELA’S OPPOSITION
Reports of the deal has caused unease and anger among members of Venezuela’s opposition, already up in arms about Trump’s failure to bring about genuine political change after capturing Maduro, The Guardian reports.
“It’s a land grab – a massive land grab,” said one well-known opposition figure who asked not to be named because of the sensitivities of criticizing the US. “It’s revolting because this is not the United States one would have [expected]. This is not the United States of the Marshall plan. This is a rapacious, mafioso United States,” they added.
Ricardo Hausmann, a professor at Harvard University and an exiled former Venezuelan planning minister, called the deal “unconstitutional.”
“An illegitimate interim government with an illegitimate hydrocarbons law has no legitimacy to strike this unconstitutional deal,” he wrote on X, formerly known as Twitter. “It will be a fiasco for all involved.”
The opposition see the deal as clearly strengthening Delcy Rodriguez at their expense.
“Rodríguez and her government have probably signed the deal in part because it lowers the Trump administration’s incentive to press for free and fair elections,” Alamariu says.
© Copyright Latinvex
RELATED
